Farm Subsidies

End It, Don't Mend It

How to get rid of farm subsidies once and for all


Congress is fundamentally a gathering of horse-traders, and the body always seems to find a way to put pork into its already-lavish spending bills. When recent reports revealed that the supplemental spending bills for Iraq contained funding for peanut storage and spinach growers, Congress finally caved—apparently that was a bridge too far. But that won't be the last we hear from farm commodity groups this year.

The current farm bill, a multi-year spending program for commodity and rural programs, is due for renewal in September, and Secretary of Agriculture Mike Johanns is causing a stir by becoming the first ag head in recent memory to submit a draft proposal of his own.

Farm bills historically have been settled in back-room deals between members of Congress and commodity groups, with taxpayers, consumers and food processors left out of the loop until it was too late. The United States was founded on the idea of limited government, but somewhere along the line agriculture came to be seen as "special," and deserving of state programs and market interventions.

Even today, in a modern, globalized world, maintaining a degree of self-sufficiency in agricultural production in the name of national security is seen as a worthy goal, and no evidence to the contrary from the disastrous "self-sufficiency" programs in North Korea and Zimbabwe can persuade agro-evangelists of the follies of isolationist and interventionist farm policy. Apparently, markets work for everything except agriculture.

No government agency, no matter how well-funded and extravagantly staffed, can possibly have all the knowledge to manage markets efficiently; it is better that they get out of the business altogether. That's easier said than done though, as anyone who has seen the powerful farm lobby in action can attest.

But a confluence of events this year—a Doha round of free trade agreements in need of a kick-start, budget pressures and renewed commitment to fiscal responsibility from the Democrats in Congress, and growing public awareness of the failures of farm programs—all point to the need for reform. The question is: with what do we replace the current expensive and outdated programs?

How about nothing? A commitment to phase out farm subsidies, "rural development" programs, and ad-hoc disaster payments is the best action Congress could take in September. They should couple this with repealing the permanent legislation that would allow agriculture programs to be reinstated in future. If Congress had to start from scratch every time the farm lobby wanted more taxpayer-funded largesse, they would have a harder time passing it.

Unfortunately the very political power that keeps farmers on the government payroll means that an outright and overnight end to farm programs is unlikely without "financial inducement." An up-front buyout of existing trade barriers and farm subsidies, based on (but less than) the present discounted value of seven years of expected payments—5 years representing the approximate tenure of a farm bill, plus two bonus years—might do the trick. Based on current spending projections, that could cost somewhere in the vicinity of $75 billion.

That's a lot of money, even in Washington. But it is significantly less than the $1.7 trillion that a recent Cato Institute study estimated was lost to taxpayers and consumers over the last 20 years of farm programs. And if it would ensure permanent freedom for farmers, consumers and taxpayers, it would be a worthwhile investment indeed. It would compensate farmers for the likely fall in land values in some counties, and farmers could invest that money in their farms, purchase private insurance for tougher times, or acquire education and training to ease a transition out of farming altogether.

To be sure, not every farmer will continue farming after the change, just as not every shop owner is guaranteed a spot on Main Street next year, or even tomorrow. But many will, and it is unlikely that an open American economy will starve any time soon. American land and technology will ensure a competitive U.S. agricultural sector even without government assistance, as demonstrated by the majority of farmers who thrive without assistance from the government.

Farm programs, like all corporate welfare, involve taking money from people who have earned it and giving it to people who have not. There's nothing exceptional about them.

Sallie James is a policy analyst at the Cato Institute's Center for Trade Policy Studies and co-author of "Freeing the Farm: A Farm Bill for All Americans."

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